Jun 10, 2014

Banks want Fixed deposit income tax free

Inside a move that will probably benefit
consumers as well as boost infrastructure financing, bankers will seek tax
breaks upon deposits and long-term bonds. Public sector banking companies will
submit on the government their cash requirements if credit is to grow by 16%
during FY15.

Finance
minister Arun Jaitley will talk with CEOs of foremost banks, financial
institutions and economists included in his pre-Budget discussions. Sources
said that this meeting might not be restricted to simply pre-Budget suggestion
which the finance minister may possibly seek feedback upon long-term capital
specifications and consolidation inside banking industry. Bankers said that bad
loan resolution was also one of the issues that they can raise. RBI has
provided a unique dispensation allowing banking companies to spread the losses
arising away from sale of bad loans in a discount to property reconstruction
companies (ARCs) within the next two many years. Banks said that they can would
seek several fiscal relief as well.

"We
have previously sensitized. The government on a few issues about the direct tax
side and some on the program tax side. We have additionally given our tip on
larger plan matters on having stalled projects all set, " said Mirielle V
Tanksale, chief executive of the Native indian Banks' Association. One
suggestion from the banks is that interest income through bank deposits should
be subject to indexation help. In other terms, tax would be paid only about the
real returns over the rate associated with inflation.

The banker said that to come mobilizing deposits to
advance growth could be a challenge. Banks tend to be facing competition
through fixed maturity programs of mutual cash, government small conserving
schemes and tax-free bonds of loan companies. "For tax payers, it doesn't
make sense to maintain fixed deposits which often attract tax. Publish tax, the
results drop to all around 6% which, in real terms, is usually a negative
return after factoring inflation, inches he said.

The banker also explained that creating avenues for. Long-term cash were
imperative. "Given the state of hawaii of Indian connection markets, the
burden associated with funding infrastructure could fall on banking companies.
Allowing banks for you to float long-term bonds, which are both tax-free or
exempt through reserve requirement, would enable banks to supply long-term
loans, inches he said.

The
consultation comes close about the heels of the FM's ending up in financial
regulators : including Reserve Bank of India, Insurance coverage Regulatory and
Advancement Authority and Pension plan Fund Regulator Expert - in Mumbai upon
Saturday. Although the meeting was perhaps the quarterly gathering of
regulators beneath the aegis of the Financial Stability Advancement Council,
the finance minister had used the ability to obtain feedback from banks.

About
Saturday, during his / her Mumbai visit, Jaitley said that this government
would offer its response after it had utilized its mind on the recommendations.
The committee has suggested that this government transfer its holding in public
sector banks to your holding company : a move that can reduce government
influence about the management and enable them raise more capital from the
markets.